For those of us who have grown up with the concept of securing important or expensive things, the idea that it is a form of gambling is usually quite strange. After all, there is a world of difference between the glassy eyes and bad decisions that fill the slot machines and the sensible dominant idea of insurance. In reality, insurance can be compared to gambling, but only in a very abstract sense. Today we explore Ned Flanders’ approach to travel and travel insurance … and why, in most cases, his ar-diddly-arguments just don’t hold up!
Ned Flanders’ approach to insurance
In reality, the school of thought that says insurance is a form of gambling is much older than Ned Flanders (The Simpsons ultra-religious neighbor). However, it is very likely that the pop culture reference to Ned’s belief is the first time that many of us in the West have come across the concept. In the 1996 episode of The Simpsons, Hurricane Neddy, a hurricane hits Springfield but only destroys the Flanders’ home. When Marge asks about insurance, Maude says that Ned didn’t believe in it, he considered it a form of gambling.
The reason behind this is that when you take out home insurance, travel insurance, etc., you are effectively betting with the insurance company that a specific event will not occur (destruction of your home, getting sick while abroad, etc. ). The insurance company is betting it won’t happen.
The difference between insurance and gambling
The idea that insurance is like gambling appears to be nothing more than an exercise in twisted logic, when looking at the purpose of insurance compared to the purpose of the game. People buy insurance because:
They want to mitigate financial loss in case something happens (quite unlikely). In travel insurance, this would be the risk of getting sick or injured, being the victim of a crime or having logistical difficulties that imply economic losses.
People play because:
They want to earn a lot of money without working for it (possibly the reason why religions are so often opposed to it).
What is a random contract?
A random contract is a more accurate name for the form of agreement that travel insurance represents. Its definition is “a contract in which the performance of one or both parties depends on a particular event.” These contracts can mean a big “win” for one party and a loss for the other. However, with today’s insurance environment, the profit / loss ratio is typically much more uniform than that seen in gambling.
So what is the purpose of insurance?
Travel insurance, and insurance in general, provide a vital social service. If people had no choice but to take the risk of owning a home, owning a car, being responsible for their own medical expenses abroad, etc., they might never do any of the above activities. Keep in mind that while Australia has socialized healthcare, almost every other country in the world does not … and medical bills can run into the tens of thousands very quickly. Without the small expense of travel insurance, very few people would leave their home country. We would have a fraction of the understanding of other cultures, languages, and religions that make our world so rich today.
Rather than thinking of vacation insurance as a game, it is much more helpful to consider that you are “paying for the peace of mind.” You are paying a small amount to mitigate the huge financial loss that could occur in the future. When you look at it this way, it’s definitely worth it!
